ARGUMENT  OF 


Hon.  CHARLES  S.  HAMLIN 

A 


Before  the  Legislative  Committee 
on  Taxation: 

j 


Boston,  February  2nd,  1900. 


AND  REMARKS  OF 

HORATIO  G.  CURTIS,  Esq. 


PUBLISHED  BY  THE 

Massachusetts  Anti- Double-Taxation  League. 
Office,  6  Beacon  St.,  Boston. 


a; 

or 


THE  BILL. 


HOUSE . No.  40. 


[Bill  accompanying  petition  of  the  Massachusetts  Anti-Double-Taxation  League.] 


Commonwealth  of  fiDassacbusetts. 


In  the  Year  One  Thousand  Nine  Hundred. 


AN  ACT 

To  exempt  from  Taxation  in  the  Commonwealth  Personal 
Property  situated  and  taxed  without  the  Commonwealth, 
and  shares  of  Certain  Corporations  organized  under  the 
Laws  of  other  States. 


Be  it  enacted  by  the  Senate  and  House  of  Representatives 
in  General  Court  assembled ,  and  by  the  authority  of  the  same , 
as  follows :  — 


*o 


C 

o 


o 


ft 

0- 

• — 


1  Section  i.  Section  four  of  chapter  eleven  of  the  Public 

2  Statutes,  as  amended  by  chapter  seventy-six  of  the  acts  of 

3  the  year  eighteen  hundred  and  eighty-two,  and  by  chapter 

4  two  hundred  and  twenty-eight  of  the  acts  of  the  year 

5  eighteen  hundred  and  eighty-seven,  and  by  chapter  three 

6  hundred  and  sixty-three  of  the  acts  of  the  year  eighteen 

7  hundred  and  eighty-eight,  is  hereby  further  amended  by  add- 

8  ing  at  the  end  thereof  the  following  words  :  “and  provided 

9  also ,  that  no  taxes  shall  be  assessed  on  personal  property 
10  situated  and  subject  to  taxation  without  the  Common- 


p  24788 


11  wealth,  or  on  shares  of  corporations  which  are  organized 

12  under  the  laws  of  other  states,  and  the  property  of  which 

13  is  taxable  within  or  without  the  Commonwealth.  The 

14  income  of,  or  dividends  upon,  such  personal  property  or 

15  shares,  however,  shall  be  included  in  personal  estate  for 

16  the  purposes  of  taxation,” — so  that  the  last  clause  of  said 

17  section  four  shall  read  as  follows :  provided  that  no  taxes 

18  shall  be  assessed  in  any  city  or  town  for  state,  county  or 

19  town  purposes  upon  the  shares  in  the  capital  stock  of  a 

20  corporation  organized  or  chartered  in  the  Commonwealth 

21  paying  a  tax  on  its  corporate  franchises  under  the  provi- 

22  sions  of  chapter  thirteen  for  any  year  in  which  it  pays  such 

23  tax,  but  such  shares  shall  be  taxable  to  the  owners  thereof 

24  for  school  district  and  parish  purposes,  and  this  proviso 

25  shall  apply  to  corporations  mentioned  in  the  forty-sixth 

26  section  of  said  chapter  thirteen, —  and  provided  also,  that 

27  no  taxes  shall  be  assessed  on  personal  property  situated 

28  and  subject  to  taxation  without  the  Commonwealth,  or  on 

29  shares  of  corporations  which  are  organized  under  the 

30  laws  of  other  states,  and  the  property  of  which  is  taxable 

31  within  or  without  the  Commonwealth.  The  income  of,  or 

32  dividends  upon,  such  personal  property  or  shares,  how- 

33  ever,  shall  be  included  in  personal  estate  for  the  purposes 

34  of  taxation. 

1  Section  2.  The  exemption  of  personal  property  situ.-' 

2  ated  and  subject  to  taxation  without  the  Commonwealth 

3  and  the  exemption  of  shares  of  corporations  organized 

4  under  the  laws  of  other  states,  the  property  of  which  is 

5  taxable  within  or  without  the  Commonwealth,  provided  in 

6  this  act,  shall  apply  only  to  the  property  of  such  persons  as 

7  comply  with  the  provisions  of  section  thirty-eight  of  chap- 

8  ter  eleven  of  the  Public  Statutes  requiring  the  inhabitants 

9  to  bring  in  to  the  assessors  true  lists  of  their  property  not 
10  exempted  from  taxation. 

1  Section  3.  This  act  shall  take  effect  upon  its  passage. 


4 


ARGUMENT  OF 


Hon.  CHARLES  S.  HAMLIN 


Before  the  Committee  on  Taxation,  Boston, 
February  2nd,  1900. 


Mr .  Chairman  and  Gentlemen  : 

I  appear  as  President  of  the  Massachusetts  Anti-Double- 
Taxation  League,  an  organization  which  represents  almost 
every  profession  and  every  branch  of  industry  in  this 
Commonwealth.  We  have  filed  a  petition  with  an  accom¬ 
panying  Bill,  which  it  will  not  be  necessary  to  read,  pro¬ 
viding  practically  that  the  existing  law  as  to  taxation 
be  amended  so  that  no  taxes  shall  be  assessed  on  personal 
property  situated  and  subject  to  taxation  without  the  Common¬ 
wealth  or  on  shares  of  corporations  which  are  organized  under 
the  laws  of  other  states  and  the  property  of  which  is  taxable 
within  or  without  the  Commonwealth.  The  income  of,  or 
dividends  upon,  such  personal  property  or  shares,  however, 
our  Bill  provides,  shall  be  included  in  personal  estate  for  the 
purposes  of  taxation.  The  present  law,  as  of  course  is  well 
understood,  levies  a  tax  on  the  full  market  value  of  holdings 
of  Massachusetts’  citizens  in  stocks  in  foreign  corporations 
although  those  foreign  corporations  are  taxed  upon  the  full 
market  value  of  their  property  in  the  places  of  their  domicile. 
We  come  before  you  and  ask  that  this  law  be  repealed  in  so 
far  as  I  have  indicated,  and  that  in  place  of  a  tax  upon  the 
»  market  value  of  such  foreign  stocks  there  shall  be  substituted 
a  tax  on  the  income  which  Massachusetts’  holders  receive  from 
such  stocks. 

This  leads  up  to  an  important  point  upon  which  I  wish  to 


5 


make  myself  perfectly  clear.  I  think  we  will  all  agree  that 
the  law  to-day  is  not  enforced.  Both  the  petitioners  and 
remonstrants  cordially  will  join  hand  in  hand  on  that  propo¬ 
sition.  And  I  want  to  say,  first,  that  I  believe  thoroughly  that 
any  law  which  is  on  the  statute  books  of  Massachusetts  should 
be  fairly  and  honestly  enforced,  and  I  would  not  for  a  moment 
hold  my  position  as  president  of  this  society  and  come  before 
you  without  first  making  myself  plain  on  that  point.  I  have 
been  in  past  years  in  the  somewhat  unpleasant  position  of 
having  to  enforce  laws  the  wisdom  of  which  I  did  not  endorse. 
I  tried,  however,  to  enforce  them  honestly  and  fearlessly,  and  I 
believe  that  if  this  law  as  it  stands  to-day  is  to  remain  on  the 
statute  books  it  should  be  honestly  and  fearlessly  enforced, 
whatever  the  consequences.  If  we  have  a  law  on  the  statute 
books  which  is  unfair  or  unjust  the  proper  way  is  to  repeal 
that  law,  but  if  it  is  not  repealed  I  will  join  hands  with  any¬ 
body  to  insist  that  the  executive  department  of  the  State  shall 
enforce  that  law  rigorously. 

We  ask  you  to  change  the  existing  law,  not  because  you 
may  call  it  double  taxation  or  single  taxation.  The  gist  of  our 
appeal  to  you,  gentlemen,  is  to  change  this  law  because  it  is 
unjust,  and  because  it  is  unfair,  and  because,  if  actually  en¬ 
forced,  it  will  defeat  its  purpose.  I  appreciate  fully  that  you 
have  to  consider  ways  and  means  to  provide  revenue  for 
carrying  out  the  laws  of  Massachusetts  and  protecting  our  citi¬ 
zens  and  our  property,  and  any  one  coming  before  you  must 
be  prepared  to  argue  the  question  as  to  what  the  loss  will  be 
to  the  state  in  revenue  provided  any  suggested  amendment  to 
the  laws  is  made.  In  this  connection,  it  is  not  for  us  to  con¬ 
sider  this  morning  what  gain  would  accrue  provided  the  ex¬ 
isting  law  were  enforced.  The  sole  question  that  we  ask  you 
to  consider,  briefly,  is  what  loss  would  accrue  to  the  state  pro¬ 
vided  in  your  discretion  you  see  fit  to  recommend  the  amend¬ 
ment  which  we  propose  this  morning.  The  pertinent  ques¬ 
tion  at  once  arises  :  Will  it  be  necessary  for  the  state  to  im¬ 
pose  any  new  taxes  provided  the  existing  tax  laws  are  changed 
as  we  suggest  ? 

I  appreciate  that  taxation  is  not  a  blessing.  It  is  taking 


6 


private  property  for  the  purposes  of  the  state.  I  appreciate 
that  in  many  ways  taxation  is  more  burdensome  in  Massachu¬ 
setts  on  one  class  than  on  another,  and  I  believe  firmly  that  it 
would  be  very  difficult  to  devise  a  uniform  system  of  taxation 
in  the  State  of  Massachusetts  that  would  impose  the  burdens 
of  taxation  fairly  and  honestly  on  each  individual  in  proportion 
to  justice  and  fairness.  For  that  reason  I  thoroughly  believe 
to  a  limited  extent  in  the  theory  of  local  option  in  taxation, 
because  I  believe  that  a  theory  of  taxation  could  be  devised 
for  some  of  the  cities  of  the  state  which  would  bring  about 
substantial  justice,  which,  however,  would  not  be  wise  and  fair, 
and  would  be  perhaps  burdensome,  if  it  were  applied  in  some 
towns  of  the  state.  I  thoroughly  agree,  and  will  agree,  with 
all  that  our  friends  the  remonstrants  will  say  to  you  about  the 
burdens  of  taxation.  The  secret,  the  art  of  taxation,  of  course, 
is  to  put  the  burden  where  it  belongs,  so  that  each  citizen  may 
pay  his  share,  his  just  share,  of  the  expenses  of  government. 

It  is  impossible  to  state  accurately  what  is  the  value  of  hold¬ 
ings  of  stock  of  foreign  corporations  on  which  to-day  a  tax 
is  levied  and  collected.  I  take  the  figure  at  about  $70,000,- 
000,  or  from  $70,000,000  to  $100,000,000.  I  don’t  know  that 
my  friends  the  remonstrants  will  seriously  object  to  that  fig¬ 
ure.  It  is  really  a  guess ;  it  is  impossible  accurately  to  de¬ 
termine  it,  but  I  take  it  from  $70,000,000  to  $100,000,000  is 
actually  reached  by  assessors  to-day,  either  by  the  doomage 
process  or  from  returns  of  the  comparatively  few  who  make 
returns.  But  when  we  come  to  the  amount  or  value  of  foreign 
stocks  actually  held  by  citizens  of  Massachusetts  but  not 
reached  by  the  assessors  we  are  even  farther  away  from  what 
would  be  a  possible  estimate.  I  want  to  agree  on  all  the 
non-essentials  of  our  case,  and  I  am  perfectly  willing  to  say 
that  I  believe  (it  is  an  idle  guess,  I  could  not  substantiate  it) 
that  as  much  as  a  billion  dollars’  worth  of  foreign  stocks  is 
held  by  citizens  of  Massachusetts  to-day.  If  that  statement  is 
challenged  I  cannot  defend  it,  because  I  don’t  think  any  one 
could  ever  substantiate  it  or  could  prove  that  it  is  not  correct. 
For  the  purpose  of  my  argument  I  can  only  state  what  I  be¬ 
lieve, —  that,  roughly  speaking,  perhaps  you  may  say  a  hun- 


7 


dred  millions  is  assessed  and,  roughly  speaking,  perhaps  a 
billion  is  held.  I  don’t  know  that  our  friends  the  remon¬ 
strants  would  differ  very  much  from  us  on  that  proposition. 
It  is  as  nearly  accurate  as  any  of  us  probably  can  estimate 
and  I  am  certainly,  I  think,  not  under-estimating  the  amount ; 
perhaps  I  am  largely  over-estimating  it. 

It  is  perfectly  clear  that  under  existing  conditions,  when  you 
assess,  roughly  speaking,  only  one  hundred  millions  of  foreign 
stocks,  the  change  we  suggest,  of  ceasing  to  levy  the  tax  rate 
on  the  assessed  value  and  in  lieu  thereof  of  levying  on  the 
income  of  such  stocks,  would  leave  a  deficit  in  the  revenues ; 
the  revenue  thus  secured  would  be  very  much  less.  I  don’t 
suppose  it  would  be  perhaps  more  than  one  tenth  as  much.  But 
gentlemen,  that  is  not  the  condition  of  things  that  is  really  facing 
us  here.  We  are  perfectly  well  aware  that  this  law  is  not  com¬ 
plied  with,  that  the  assessors,  doom  as  they  will  and  must,  and 
they  use  all  due  diligence,  do  not  get  at, —  and  they  can’t  get 
at,  I  believe, —  much  more  than  one  tenth  of  the  real  hold¬ 
ings.  So  to-day  you  can  simply  dismiss  the  case,  so  tar  as 
this  is  concerned,  with  the  feeling  that  all  we  are  getting  to¬ 
day  is  all  we  can  get  under  the  law  as  it  is  to-day.  If  the  law 
is  changed  we  can  take  up  the  question  as  to  what  more,  if 
any,  we  will  get  by  such  a  change  in  the  law. 

If  the  law  is  amended  as  we  suggest,  it  will  then,  as  we 
submit,  be  just  and  fair,  and  you  will  have  many  more  returns 
from  ^individuals,  and  unquestionably  you  will  find  that  al¬ 
though  each  individual  pays  less,  the  total  proceeds  collected 
will  be  at  least  as  large  as  to-day.  In  addition  to  increasing 
the  number  who  make  returns,  you  will  also  increase  the  num¬ 
ber  of  investors  in  such  securities.  Enormous  sums  of  prop¬ 
erty  are  held  to-day  in  Massachusetts  in  trust.  Trustees, 
for  the  reason  that  I  will  show  you  later,  cannot  for  a 
moment  think  of  investing  in  any  stocks  of  foreign  corpora¬ 
tions  ;  they  are  excluded  from  that  field.  The  moment  you 
say  that  instead  of  taxing  the  assessed  value  of  these  stocks 
you  assess  the  income  that  comes  into  the  state,  the  income 
which  this  state  protects,  the  property  which  Massachusetts’ 
citizens  receive  and  which  the  state  exercises  its  police  power 


8 


of  protection  and  care  over,  the  moment  you  limit  taxation  to 
that  income  it  is  easy  to  see  that  trustees  will  have  open  to 
them  a  field  of  investment  which  they  never  have  had  before. 
The  result  is  that  investments  in  these  foreign  stocks  will  very 
largely  increase.  There  is  nothing  in  the  laws  to-day  to  pre¬ 
vent  a  trustee  investing  in  land  in  other  states,  and  of  course 
on  this  investment  he  is  not  taxed  in  Massachusetts.  If  you 
change  this  law,  holdings  that  are  now  made  in  real  estate  in 
foreign  states  will  be  invested,  or  there  will  be  an  inducement  to 
invest  them,  in  personal  property  in  foreign  states,  and  thus,  in 
my  judgment,  you  will  add  to  the  total  net  amount  of  taxes  the 
State  of  Massachusetts  will  receive.  In  other  words,  I  believe 
firmly  that  if  the  law  is  changed  and  amended  as  we  suggest 
the  State  of  Massachusetts  in  the  aggregate  will  receive  more 
in  taxation  than  it  receives  at  the  present  time. 

What  is  the  result  of  the  law  as  it  is  to-day,  as  it  is  enforced 
to-day  ?  The  effect  is  that  if  a  citizen  of  Massachusetts  owns 
stock  in  a  foreign  corporation  to-day  taxes  are  assessed  on  the 
market  value  of  that  stock.  The  tax  rate  applied  to  that  mar¬ 
ket  value  takes  from  this  tax-payer  more  than  one  third,  or  a 
varying  sum  from  thirty  to  more  than  fifty  per  cent,  of  the  net 
income  that  that  man  receives.  I  don’t  think  that  any  of  our 
friends  the  remonstrants  will  deny  that  that  is  not  just,  that 
that  is  not  fair,  it  is  not  right.  The  citizens  of  Massachusetts 
could  not  do  business  here  if  the  tax  rate  were  so  high  that  it 
took  away  from  thirty  to  over  fifty  per  cent,  of  his  income. 
You  all  remember  the  income  tax  in  the  Wilson  Tariff  Act, 
which  was  pronounced  unconstitutional  by  the  Supreme 
Court.  That  tax  amounted  to  only  two  per  cent.  I  don’t 
think  any  civilized  country  ever  imposed  a  tax  on  incomes 
amounting  to  more  than  two  or  three  per  cent.,  except  in  the 
stress  of  a  great  civil  war  or  some  great  national  crisis.  Of 
course  we  have  in  this  state  the  collateral  inheritance  tax,  and 
we  have  the  inheritance  tax  now  on  the  national  statute  books, 
but  these  taxes  rest  upon  a  different  principle,  namely,  that  the 
state  has  a  right  to  prescribe  as  to  the  disposition  of  property 
and  to  take  a  certain  share  of  that  property.  Of  course,  this 
is  really  not  a  tax  on  income.  In  my  judgment  it  is  not  a  tax 


9 


at  all.  It  is  simply  a  fair  appropriation  by  the  state  of  part 
of  what  it  permits  this  person  to  receive  from  a  testator  or 
intestate  estate. 

What  is  the  result  of  present  methods  of  taxation  ?  I  have 
here  some  figures, —  taken  from  a  trust  account  in  New  York 
state.  The  first  item  is  the  Tamarack  Mining  Company.  Its 
market  value,  we  will  say,  is  $178  a  share.  It  paid  dividends- 
last  year,  after  payment  of  taxes  where  the  property  is  situ¬ 
ated,  I  believe,  of  $10  a  share.  The  tax  at  the  rate  of  $15.50 
a  thousand,  which  I  take  as  an  approximately  correct  rate,  on 
$178  would  be  $2.75.  If  that  owner  moved  to  Massachu¬ 
setts,  while  he  would  receive  in  dividends  $10  a  share  per 
year,  he  would  have  to  pay  of  that  $10  under  the  existing  tax 
rate  $2.75.  That  is  twenty-eight  per  cent,  of  the  income.  If 
all  his  property  were  invested  in  Tamarack  Mining  Company 
stock,  this  person  would  have  to  pay  twenty-eight  per  cent,  of 
his  income  to  the  Commonwealth  of  Massachusetts,  although 
the  Company  has  paid  full  taxes  e.  g.  in  Michigan.  I  submit 
to  you,  gentlemen,  that  is  not  right,  it  is  not  just.  It  is  un¬ 
necessary  to  say  that  this  is  double  taxation!  It  is  unjust 
taxation !  I  simply  appeal  to  you  as  citizens  of  this  Common¬ 
wealth,  interested  in  seeing  that  every  citizen  shall  pay  his 
fair  share  toward  the  support  of  the  Commonwealth,  knowing 
well  that  you  will  all  agree  that  this  kind  of  taxation  is  not 
just  and  is  not  right  and  that  a  law  that  would  confiscate 
twenty-eight  per  cent,  of  one’s  income  is  a  law  that  should  not 
be  permitted  to  remain  on  the  statute  books. 

Take  the  C.  B.  &  Q.  Railroad.  Assume  its  market  value 
is  $124  a  share.  Its  dividends  last  year  were  $6.  The  tax 
on  the  existing  rate  would  be  $1.92.  If  a  Massachusetts  citi¬ 
zen’s  property  were  held  in  C.  B.  &  Q.  Railroad  stock,  for 
every  $6  he  received  as  income  he  would  have  to  pay  to  the 
Commonwealth  $1.92.  That  is  thirty-two  per  cent,  of  the  net 
income.  Gentlemen,  that  is  not  just.  It  is  not  right. 

Take  the  United  States  Trust  Company  of  New  York.  The 
market  value  of  the  shares,  the  last  quotation  I  had, —  it  was 
some  months  ago, —  was  $1270.  To-day  it  is  much  higher, 

I  think  $1500  or  $1600.  At  any  rate,  it  was  $1270  three  or 


four  months  ago.  That  pays  in  dividends  $40  a  year.  The 
tax  would  be  $19.68.  That  is  just  about  forty-nine  per  cent, 
of  the  net  income,  which  a  citizen  of  Massachusetts  would 
have  to  pay  to  the  state  because  he  or  she  owned  stock  in 
this  foreign  corporation. 

One  more  case,  the  Union  Trust  Company  of  New  York. 
Its  market  value  some  months  ago  was  $1125  a  share.  It 
paid  dividends  last  year  of  just  $32  on  each  share.  The  tax 
which  a  citizen  of  Massachusetts  owning  that  stock  would  have 
to  pay  out  of  that  $32  which  he  or  she  received  would  be 
$17.43.  That  is  fifty-four  per  cent,  of  the  income. 

I  pick  out  at  random  these  four  cases.  The  lowest  is 
twenty-eight  per  cent,  of  the  income,  the  highest  is  fifty-four 
per  cent,  of  the  income.  Gentlemen,  I  simply  lay  these  facts 
before  you.  Call  it  whatever  you  please,  single  or  double 
taxation,  it  is  not  right  and  it  is  not  just.  I  still  believe,  if 
you  decide  not  to  introduce  this  amendment,  if  'you  decide 
that  this  law  shall  remain  on  the  statute  books,  that  you  ought 
to  enforce  it.  I  believe  you  ought  to  amend  this  law  some  way 
so  that  either  you  shall  collect  that  fifty-two  per  cent,  or  you 
shall  drive  that  person  out  of  the  state,  or  you  shall  force  him 
to  invest  in  some  other  property.  I  think  the  remonstrants 
and  we  will  all  agree.  At  any  rate,  that  is  my  proposition.  I 
think  it  is  a  disgrace  to  any  commonwealth  to  have  any 
statute  on  its  books  that  is  openly  and  successfully  evaded, 
as  is  this  statute,  and  while  I  appeal  to  you  to  change  the 
law,  I  simply  say  that  if  you  don’t  change  the  law  then  I  ap¬ 
peal  to  you  to  enforce  it. 

What  is  the  result,  supposing  we  are  to  enforce  this  law,  be¬ 
cause  I  believe  that  this  Committee  will  see  the  justice  of  the 
claim  either  that  you  shall  repeal  the  law  and  amend  it  as  we 
have  indicated  or  enforce  it.  I  appeal  strongly  to  you  to  take 
either  horn  of  this  dilemma.  I  appeal  to  you  to  do  one  or 
the  other.  And  I  shall  assume  in  the  moment  that  I  have  left 
that  you  will  do  either  one  or  the  other ;  you  will  either  re¬ 
peal  the  law,  as  we  suggest,  or  you  will  provide  that  this  law 
shall  be  executed  so  that  no  man  in  this  state  can  escape  it. 
What  will  be  the  result  if  you  do  change  this  law  so  that  it 


must  be  obeyed  ?  Of  course  no  trustee  holding  stocks  for  his 
beneficiary  could  ever  think  of  investing  in  any  stock  in 
foreign  corporations,  because  it  would  practically  eat  up,  as  I 
have  said,  from  thirty  to  fifty  per  cent,  of  the  income.  It 
would  not  be  prudent.  He  would  not  represent  the  trust  es- 
state  properly  if  he  did  that.  It  would  be  an  improper  dispo¬ 
sition  of  the  property  of  his  beneficiary. 

What  will  be  the  result  as  to  other  people  in  Massachusetts, 
citizens,  you  and  me  and  all  of  us,  if  we  know  that  this  law, 
as  it  ought  to  be,  if  not  repealed,  is  going  to  be  enforced  ? 
Supposing  we  are  holding  C.  B.  &  Q.  stock,  or  Tamarack,  or 
any  stocks  in  foreign  corporations.  Supposing  you  pass  a  law 
that  on  the  first  day  of  January  next  you  shall  require  sworn 
returns,  you  shall  force  every  citizen  under  penalty  of  im¬ 
prisonment  to  go  forward  and  show  to  the  assessors  every 
dollars’  worth  of  property  and  stock,  foreign  and  domestic, 
that  he  holds.  What  is  the  condition  that  would  face  you  as 
Massachusetts  citizens  ?  You  would  simply  say,  “I  can  no 
longer  afford  to  hold  those  foreign  stocks,  I  have  got  to  sell 
them, ’’and  instantly  you  would  sell  them.  It  is  not  to  be  supposed 
that  any  person  of  average  intelligence  in  Massachusetts,  if 
this  law  were  to  be  enforced,  would  for  a  moment  think  of  hold¬ 
ing  property  on  which  he  would  have  to  pay  to  the  state  fifty 
per  cent,  of  the  net  return  in  the  shape  of  taxation.  A  sale 
of  the  property  would  be  a  way  in  which  a  man  honestly  could 
avoid  the  operation  of  this  law,  and  of  course  the  people  of 
Massachusetts  would  at  once  invest  in  other  things.  They  will 
invest  in  land  in  other  states,  where,  under  our  laws,  they  are 
not  subject  to  taxation.  As  you  gentlemen  all  know,  to-day 
if  you  as  an  individual  invest  in  land  in  New  York  state  the 
Commonwealth  of  Massachusetts  does  not  attempt  to  tax  it, 
but  if  you  buy  stock  in  a  corporation  owning  that  land  you 
are  instantly  taxed.  From  the  time  the  law  is  enforced  there 
would  not  be  one  share  of  stock  of  a  foreign  corporation 
owned  by  a  citizen  of  Massachusetts ! 

I  have  not  much  sympathy  for  citizens  who  say  they  will 
leave  the  state  on  any  question  of  taxation.  I  don’t  propose 
to  argue  for  them  here.  I  propose  to  stay,  and  am  glad  to 


stay  in  the  best  state,  I  believe,  in  the  Union.  And  I  don’t 
propose  to  argue  as  to  men  of  wealth  who  might  be  induced 
to  come  into  Massachusetts  if  we  have  just  tax  laws.  If  they 
don’t  care  to  come  into  our  glorious  Commonwealth  let  them 
stay  out.  I  simply  say,  gentlemen,  that  I  do  appear  here  to 
speak  in  behalf  of  citizens  of  Massachusetts  who  won’t  leave 
the  state,  who  could  not  and  would  not  if  they  could  leave  the 
state  under  any  system  of  taxation.  I  simply  ask,  in  behalf 
of  those  men,  that  you  will  amend  this  law  so  that  it  will  be 
right  and  just,  so  that  a  person  can  invest  in  stock  of  foreign 
corporations  without  being  penalized  for  it ;  so  that  we  shall 
be  able  to  widen  the  scope  of  our  investments,  which  of  course 
will  redound  to  the  profit  of  all  our  citizens.  If  Massachu¬ 
setts  were  a  new  state  ;  if  her  resources  were  not  abundantly 
developed  ;  if  she  had  magnificent  farming  areas  such  as  we 
see  in  the  West,  needing  capital ;  if  she  had  mines  of  gold 
and  copper  and  iron  and  silver,  why,  perhaps  it  might  not  be 
bad  policy  to  arrange  our  tax  laws  so  that  people  would  have 
to  keep  every  dollar  invested  in  the  Commonwealth.  But 
such  is  not  the  case.  Massachusetts  is  one  of  the  greatest 
industrial  states  in  the  Union  or  in  the  world  ;  but  Massachu¬ 
setts  has  so  much  capital  that  she  cannot  be  pent  up  by  the 
confines  of  this  state.  The  capital  of  Massachusetts  and  the 
energy  and  the  intelligence  goes  into  every  state  in  the 
Union,  just  as  it  is  going  to-day  to  the  Philippines,  or  to  Porto 
Rico,  or  South  America,  or  China.  Only  the  geographical 
limitations  of  the  globe  confine  Massachusetts’  capital  and 
Massachusetts’  energy.  And  yet  this  law  to-day  on  the 
statute  books,  if  you  enforce  it,  as  I  assume  you  will,  will  be  a 
decree  that  Massachusetts  industrially  must  cut  herself  off 
from  the  rest  of  the  world  and  confine  investments  of  capital 
which  its  citizens  have  earned  to  investments  in  this  state  to 
the  detriment  of  every  citizen  and  every  industry  in  the  Com¬ 
monwealth  of  Massachusetts. 

*  I  can’t  believe  that  this  Legislature  for  a  moment  will 

make  such  a  decree.  I  believe,  on  the  contrary,  it  will 
decree  that  this  law  as  it  stands  to-day,  taking  from  thirty 
to  fifty  per  cent,  of  the  income  of  a  holder  in  foreign 


l3 


stocks,  is  wrong,  is  unjust  and  shall  be  repealed.  I  re¬ 
peat  that  any  taxation,  whatever  you  call  it,  that  takes  away 
from  a  citizen  of  Massachusetts  half  the  income  from  his  in¬ 
vestments  in  foreign  stocks,  leaving  untouched  the  income  he 
derives  from  investments  in  stocks  in  this  state,  is  not  just, 
is  not  right.  I  believe .  I  know  this  Committee,  I  know  its 
reputation  for  intelligence  and  fair-mindedness  ;  I  know  it 
represents  the  Legislature  of  this  great  Commonwealth,  and 
that  you  its  members  will  consider  this  question  true  to  your 
oaths  of  office,  true  to  the  best  interests  of  this  great  Com¬ 
monwealth.  And  when  you  have  applied  that  intelligence  to 
this  problem  I  am  sure  that  you  will  reach  the  conclusion  with 
which  I  began,  that  no  law  should  remain  on  the  statute  books 
without  being  enforced,  and  that  if  you  should  enforce  this  law 
it  would  be  a  serious  blow  to  the  prosperity  of  our  grand  old 
Commonwealth.  The  alternative  is  to  change  this  law,  levy 
a  tax  on  the  income  which  Massachusetts’  people  receive  from 
their  foreign  investments,  income  which  we  protect  by  our 
laws,  which  we  protect  by  our  police  power,  and  thus  we  shall 
have  a  system  of  taxation,  to  that  extent  at  least,  which  is 
just,  is  right,  and  puts  a  proper  burden  on  the  individual  tax¬ 
payer,  leaving  for  this  Legislature  in  other  Bills  to  consider 
any  other  necessary,  wise  or  just  amendments  to  the  law  to 
render  the  burden  of  taxation  in  other  respects  more  fair, 
more  equal,  more  just  than  I  believe  it  to  be  under  the  laws 
to-day. 

Question.  (By  the  Chairman.)  Mr.  Hamlin,  before  you 
go  I  should  like  to  ask  you  two  or  three  questions.  How 
much,  in  your  opinion,  would  be  the  amount  taken  off  from 
the  income  of  the  state  provided  this  law  which  you  pro¬ 
pose  were  enacted  ?  Can  you  tell  ?  Answer.  Well,  it  is  only 
possible,  of  course,  to  make  the  wildest  guess. 

O.  No,  I  mean  as  the  law  to-day  is  enforced  by  the  asses¬ 
sors  on  the  doomage  principle;  how  much  would  be  taken  off 
from  the  income  of  the  state  ?  A.  That  is,  assuming  now 
that  there  would  be  no  increase  in  these  investments,  and  as¬ 
suming  that  foreign  stocks  only  will  be  assessed  which  are 
assessed  to-day? 


14 


Q.  For  instance,  the  state  derives  an  income  from  the  as¬ 
sessment  of  the  taxes  on  these  stocks  under  the  present  law  ? 
A.  Yes. 

Q.  Now,  how  much  is  that  income?  A.  Well,  I  should 
say,  assuming,  taking  a  basis  of  assessed  valuation  of 
one  hundred  millions — do  you  think  that  is  a  fair  assess¬ 
ment  ? 

Mr.  Winn.  I  call  it  a  little  more.  The  average  tax  would 
be  $15. 

Mr.  Hamlin.  One  million  and  a  half  should  you  say  ? 

Mr.  Winn.  It  would  be  a  million  and  a  half. 

Mr.  Hamlin.  I  should  say  a  million  and  a  half  dollars.  I 
think  we  would  agree  that  to-day  we  receive  a  little  over  a 
million  and  a  half  dollars  from  the  existing  methods  of  taxa¬ 
tion  on  stocks  in  foreign  corporations.  I  think  that  is  fairly 
accurate. 

Mr.  Winn.  If  we  could  agree  exactly  upon  the  amount 
that  is  taxed !  That  is  a  difficult  thing  to  say. 

Mr.  Hamlin.  Put  it  this  way  :  l  think  a  sum  not  exceed¬ 
ing  two  millions  of  dollars.  Of  course,  you  mean  not  the  state 
alone,  but  the  whole  community.  I  should  say  two  millions 
of  dollars. 

Q.  I  don’t  understand  what  you  mean  by  the  “  whole 
community  ?  ”  A.  The  whole  tax  as  I  understand  it. 

Mr.  Curtis.  The  sum  of  local  taxes. 

A  (continued).  It  is  the  sum  of  local  taxes. 

Q.  So  that,  if  your  bill  were  enforced,  it  would  take  from 
the  revenues  as  collected  in  the  different  cities  and  towns 
about  two  million  dollars,  roughly,  all  told  ?  A.  Well,  it 
would  be  the  difference  between  the  amount,  if  it  is  two  mil¬ 
lions,  and  the  amount  collected  by  the  proposed  law  from  the 
income  of  the  stock,  which  would  be  perhaps  —  well,  roughly, 
at  a  guess,  perhaps  two  or  three  hundred  thousand  dollars, 
assuming  of  course  no  greater  amount  of  such  foreign  stocks 
were  returned  to  or  found  by  the  assessors. 

Mr.  Winn.  You  estimate  two  classes  of  property,  property 
other  than  foreign  stocks  and  foreign  stocks,  and  you  have  put 
in  the  amount  of  foreign  stocks. 

15 


A  (continued).  Of  course  I  am  simply  speaking  now  of 
foreign  stocks. 

Q.  I  understand.  A.  It  would  be  the  difference  between 
two  or  three  hundred  thousand  dollars  and  perhaps  a  million 
and  a  half  dollars,  roughly  speaking.  If  you  desire,  I  can  try 
and  make  a  better  estimate  and  send  it  to  the  Committee. 

O.  I  think  it  would  be  well  for  you  to  put  in  everything 
that  you  consider  necessary  to  establish  your  case.  A.  Yes, 
I  will  do  that. 

Q.  Is  there  such  an  Act  as  this  in  force  in  any  of  the  other 
states  to-day  ?  A.  Do  you  mean  as  the  suggested  amend¬ 
ment  ? 

Q.  Yes.  A.  I  understand  that  there  is  no  taxation  of 
the  stocks  of  foreign  corporations  in,  I  think,  New  Hamp¬ 
shire,  Vermont,  or  certainly  no  state  around  Massachusetts. 

O.  In  none  of  the  New  England  states?  A.  I  believe  in 
none  of  the  New  England  states. 

Mr.  Curtis.  Except  Maine. 

A  (continued).  Except  Maine;  none  of  the  others.  I 
know  New  Hampshire,  Connecticut,  Vermont,  Rhode  Island 
and  New  York  do  not  assess  holdings  in  foreign  corporations 
of  their  own  citizens. 

Mr.  Winn.  Only  nominally  ? 

Mr.  Hamlin.  Nominally,  if  at  all. 

Q.  Do  you  know  what  the  facts  are  in  regard  to  the  as¬ 
sessment  of  stock  of  foreign  corporations  throughout  the  ma¬ 
jority  of  states  of  the  Union  ?  A.  I  can  ascertain  that  for 
the  Committee.  I  do  not  know  of  my  own  knowledge  at  this 
moment. 

Mr.  Winn.  I  think  the  majority  tax  them. 

O.  I  wish  you  would.  A.  Yes,  I  will  ascertain  that  for 
the  Committee. 

O.  Now,  Mr.  Hamlin,  one  more  question,  please.  What 
system  would  you  propose,  what  kind  of  a  tax  would  seem 
to  you  a  proper  one  to  make  up  for  the  loss  of  income  which 
would  result  from  the  passage  of  this  bill  ?  A.  As  I  have 
said,  I  believe  there  would  be  no  loss  of  income,  from  the  fact 
that  much  money  that  now,  for  instance,  is  invested  in  real 


estate  investments  in  other  states  would  naturally  be  invested 
in  foreign  stocks,  and  that  as  those  returns  would  be  made  to 
the  state  I  believe  the  net  result  would  be  just  the  same  as 
to-day  ;  in  other  words,  I  don’t  believe  the  State  of  Massa¬ 
chusetts  would  lose  one  dollar.  It  would  open  such  a  favor¬ 
ite  field  for  investment  that  is  now  confined  to  government 
bonds  or  realty  in  other  states  that  I  believe  the  net  result 
would  be  at  least  the  same  to  the  Commonwealth,  so  that  there 
would  be  no  new  tax  necessary.  Of  course,  this  is  purely  an 
estimate.  You  cannot  get  any  exact  figures.  But  I  know 
the  way  that  trustees  look  at  this,  I  know  the  way  the  people 
I  have  talked  with  look  at  it.  It  opens  a  favorite  field  of  in¬ 
vestment  that,  if  the  law  were  enforced,  would  be  to-day  abso¬ 
lutely  barred.  Of  course,  I  assume  to-day  that  you  might  as 
well  have  no  such  law  on  the  statute  book,  and  that  we  are 
about  like  New  Hampshire,  Vermont  and  Rhode  Island,  but 
if  the  law  is  to  continue  and  the  people  know  that  it  is  to  be 
enforced,  a  serious  condition  of  affairs  will  result.  The  re¬ 
peal  of  the  law,  on  the  contrary,  would  open  the  widest  pos¬ 
sible  field  for  foreign  investment  of  Massachusetts  capital  now 
going  into  real  estate,  government  bonds  and  other  non-tax- 
able  securities,  or  rather,  non-taxable  by  the  State  of  Massa¬ 
chusetts,  and  I  firmly  believe  that  you  would  not  have  to 
consider  any  substitute  or  new  tax ;  that  on  the  contrary  you 
would  collect  at  least  as  much  revenue  and  probably  much 
more  than  under  the  system  which  is  in  force  to-day.  In  our 
bill  we  provide  that  no  one  shall  have  the  exemption  which 
we  ask  for  unless  he  makes  a  return  to  the  assessors.  The 
result  would  be  that  every  one  would  make  that  return, 
because  then,  instead  or  paying  a  tax  on  the  market  value  of 
the  foreign  security,  he  would  pay  a  tax  simply  on  the  income 
that  he  received.  There  would  be  of  course  considerable 
difference  in  the  amounts  paid  by  each  individual,  but  there 
would  be  in  effect  a  premium  on  making  a  return  so  that  the 
State  in  the  aggregate  would  get  very  many  more  returns, 
probably  twenty  times  as  many  ;  the  gross  revenue  received 
therefore  would  not  decrease,  but  might  even  increase.  In 
addition  to  that  you  would  have  the  opportunity  for  profitable 


17 


investment  in  these  corporate  foreign  stocks,  which  would 
result  in  larger  investments,  which  presumably  would  be 
returned  to  the  assessors  and  thus  the  net  revenue  would 
be  probably  larger  than  now. 

Q.  Mr.  Hamlin,  a  man  would  probably  not  ask  the  asses¬ 
sors  to  assess  his  income  and  take  the  benefit  of  this  Act 
unless  he  thought  by  so  doing  he  would  decrease  the  amount 
of  his  taxes  would  he?  A.^  Certainly  not,  and  that  is  the 
inducement  in  this  bill  for  every  one  to  make  a  return ; 
because  the  individual  would  pay  less  taxes  than  before. 
There'  is  no  question  about  that.  In  other  words,  in  the  C. 
B.  &  O,  Railroad,  instead  of  paying  taxes  on  $124,  the  market 
value,  he  would  simply  pay  taxes  on  $6,  the  income.  It 
should  be  remembered  that  even  under  our  Bill,  the  owner 
can  be  doomed  on  that  $124  as  to-day,  unless  he  makes 
his  return.  If  he  makes  his  return  he  individually  receives 
a  great  exemption  of  taxation, —  he  is  taxed  on  $6  rather 
than  on  $124.  Of  course,  if  that  man  is  a  prudent  man 
he  will  at  once  make  his  return.  In  addition  to  that  there 
will  be  many  more  men,  in  my  judgment,  as  above  stated, 
who  will  make  returns  who  do  not  to-day,  and  in  the 
aggregate,  with  the  increase,  the  State  will  get  a  larger  sum 
of  money  than  before.  I  am  confident  on  that  proposition, 
as  confident  as  any  one  can  be  that  the  net  result  to  the 
Commonwealth  of  Massachusetts  will  be  increased  and  not 
diminished  revenue,  and  that  the  gain  will  be  distributed  over 
the  community  in  a  reduction  in  the  tax  rate.  There  is  such 
an  inducement  that  no  reasonable  man  for  a  moment  would 
hesitate  about  making  a  return  if  this  bill  became  law.  If  it 
were  tried  fora  year  and  were  found  not  to  succeed  in  practice, 
it  would  be  the  easiest  possible  thing  to  change  the  law,  and 
then,  what  would  rejoice  the  heart  of  the  average  assessors, 
he  would  have  secured  returns  from  a  great  many  men 
who  never  make  returns  to-day,  and  the  State  could  do  as 
it  saw  fit  with  regard  to  future  systems  of  taxation.  It  would 
produce  that  result.  It  would  give  you  the  benefit  of  returns 
that  you  are  never  getting  to-day  and  give  information  to 
assessors  ;  so  that,  if  it  were  not  successful  in  practice,  you 


18 


could  at  once  change  the  law  and  then  you  have  the  added 
information  as  to  the  holdings  of  these  securities.  So  I  think 
this  would  certainly  please  every  board  of  assessors  in  the 
Commonwealth  ;  it  would  certainly  give  an  inducement  to 
every  individual,  and  in  the  aggregate  I  believe  the  State 
would  receive  a  larger  sum  in  taxes  than  it  does  to-day. 

Q.  (By  Representative  Casey)  I  don’t  know  how  you 
could  reach  the  answer,  but  it  is  something  that  bears  on  my 
mind  a  little.  What  effect  will  this  have  on  the  industrial 
pursuits  of  the  State,  that  is,  money,  stocks,  investments 
where  there  is  the  largest  income  with  the  least  effort  ? 
Would  it  not  draw  from  the  industrial  pursuits  of  the  state 
which  now  employ  labor  to  go  into  these  outside  investments  ? 
And  would  not  the  fact  of  our  relieving  this  class  of  invest¬ 
ments  from  taxation  increase  their  value  to  some  extent,  their 
market  value  and  their  earnings,  so  that  it  would  make  it  an 
object  for  capital  now  invested  in  industrial  pursuits  to  go  out 
of  the  state  ?  A.  If  it  had  that  result  I  think  unquestion¬ 
ably  it  might  be  a  disadvantage.  I  don’t  think  it  would.  Of 
course,  stocks  in  foreign  corporations  to-day  are  selling  pre¬ 
cisely  the  same  in  Massachusetts  as  in  New  York,  which 
simply  proves  that  the  tax  laws  of  to-day  are  not  being 
enforced.  On  the  other  hand,  there  is  a  superabundance  of 
capital  in  Massachusetts  which  is  steadily  outpouring  over  the 
United  States,  Europe,  and  South  America;  change  in  the 
tax  laws  would  simply  give  the  state  the  benefit  of  these 
foreign  investments.  I  think  there  never  will  be  a  time  when 
we  shall  not  have  a  large  surplus  of  capital  over  all  we  need 
in  the  Commonwealth  for  every  enterprise. 

Q.  (By  Senator  Ray)  Mr.  Hamlin,  what  reason  have  you 
to  assume  that  returns  will  be  made  of  the  income  taxable 
under  this  bill  any  more  than  they  are  under  the  present 
income  law,  upon  which  there  is  notoriously  very  little  return 
made, any  more  than  there  are  by  the  present  holders  of  stock? 
A.  The  first  reason  is  that  a  security  holder  under  the  new 
law  would  be  paying  a  just,  fair  tax.  The  second  is  that  if  he 
did  not  make  returns  he  could  be  doomed  just  as  could  under 
the  law  to-day.  The  assessors,  with  the  information,  the 


19 


returns  that  they  would  get,  would  soon  be  in  a  position  to 
judge  more  accurately  as  to  those  who  made  no  returns  at  all. 
It  would  give  them  a  mine  of  information  as  to  the  amount  of 
stocks  the  average  individual  might  own.  And,  as  I  have 
said  the  fear  of  a  rigorous  dooming  from  information  that 
would  be  obtained  from  returns  of  others  would  stimulate 
every  one  to  come  in  and  make  their  returns  under  the  new 
law. 

O.  (By  Representative  Whitney)  I  would  like  to  ask  one 
question.  One  remark  which  Mr.  Hamlin  made  does  not 
appear  quite  clear  in  my  mind.  I  understood  him  to  state 
that  the  enforcement  of  the  law  would  defeat  the  intent  of  the 
law.  A.  Yes  sir.  In  other  words,  the  law  that  we  have 
to-day  is  not  enforced.  I  believe  that  not  one-tenth  of  the 
amount  of  foreign  stocks  owned  by  our  citizens  is  reached 
to-day  by  the  assessors.  That  is  merely  a  question  of  judg¬ 
ment.  I  have  no  doubt  Major  Winn,  who  knows  very  much 
more  about  these  questions  than  I  do,  will  agree  with  me  on 
that  proposition.  I  assume  that  not  one-tenth  is  actually 
reached  under  the  law  to-day.  The  moment  you  have  a  law 
in  force  providing  for  sworn  returns  and  the  moment  each 
citizen  knows  that  his  holdings  will  be  known  to  the  assessors, 
that  he  must  pay  from  30  to  50  per  cent  of  his  income,  that  is 
to  say,  a  fine  of  from  30  to  50  per  cent  for  holding  those 
stocks,  he  at  once  will  sell  them.  He  will  invest  in  govern¬ 
ment  bonds,  which  are  not  taxable  at  all,  or  he  will  invest  in 
foreign  real  estate.  We  can’t  invest  our  surplus  in  the  State, 
because  I  know  of  no  industry  that  is  not  amply  supplied  with 
capital  in  the  State  of  Massachusetts  to-day.  It  is  as  much 
as  to  say  that  every  man  found  with  a  foreign  stock  certificate 
on  his  person  after  next  January  must  pay  as  a  fine  from  30  to 
50  per  cent  of  the  net  income  he  receives  from  that  stock.  Of 
course  the  result  would  be  each  person  would  instantly  convert 
that  stock  into  some  other  security,  into  land  outside  the  State 
which  could  not  be  taxed  by  this  State,  or  into  govenment 
bonds,  which  would  not  be  taxed  all.  In  other  words,  such  a 
statute  would  be  nullified  because  every  one  could  evade  it 
honestly  by  simply  changing  the  form  of  his  investment. 


20 


REMARKS  BY 


HORATIO  G.  CURTIS,  Esq. 


At  the  hearing  before  the  Committee  on  Taxation  February 
2,  Mr.  Horatio  G.  Curtis,  President  of  the  Old  Boston  National 
Bank,  said: 

I  am  treasurer  of  the  Massachusetts  Anti- Double-Taxation 
League.  I  wish  to  give  one  or  two  illustrations  of  the  double¬ 
ness  of  our  taxation  system.  For  example,  the  Chicago, 
Burlington  &  Quincy  R.  R.  Company  possesses  a  lot  of  prop¬ 
erty  in  other  states.  That  property  is  protected  by  the  states 
in  which  the  railroad  runs,  and  as  all  property  which  is  pro¬ 
tected  by  a  state  owes  remuneration  to  the  state  that  protects 
it,  that  corporation  pays  taxes  to  every  state,  county,  city  or 
town  where  its  property  exists.  I  figure  the  tax  to  amount  to 
$1.69  per  share;  call  it  $1.70  per  share.  After  paying  that 
tax  the  rest  of  the  divisible  earnings  of  the  road  is  paid  to  the 
stockholders.  That  amounts  to  about  four  per  cent.  In  other 
words,  if  there  had  been  no  tax  payable  where  the  property 
exists,  the  dividends,  instead  of  being  $4  a  share,  would  be 
$5.70.  The  dividend  is  now  $6,  but  as  the  stock  costs  more 
than  par  the  net  return  is  about  four  per  cent,  so  that  for  all 
our  purposes  I  can  take  the  return  at  four  per  cent.  The  tax 
is  the  remuneration  paid  to  the  states  for  the  protection  that 
is  given  to  it.  When  I  hold  that  share  here  I  have  really 
contributed  a  tax  for  the  protection  that  is  given  to  my  prop¬ 
erty  where  it  exists.  If  I  am  charged  again  another  tax  here, 
because  I  happen  to  own  that  share  and  hold  it  in  Massachu¬ 
setts,  we  call  it  a  double  tax;  that  is,  I  have  paid  one  tax 
where  my  property  is  protected  and  I  pay  another  tax  where 
it  is  not  protected.  You  may  say  that  if  I  have  that  income 
the  income  comes  here  and  is  protected,  and  I  say,  ‘Yes,  and 
I  am  willing  to  pay  a  tax  on  that  income.’  That  is  what  our 
proposition  is. 

*  If  I  have  a  million  dollars  worth  of  real  estate  situated  in 
Chicago  — and  I  do  not  hesitate  to  say  that  I  am  not  in  that 
position  —  my  real  estate  is  taxed  in  the  city  of  Chicago  to  the 

#  valuation  of  a  million'  dollars.  I  pay  no  tax  in  Massachusetts 

21 


upon  that  property.  But  if,  for  convenience,  I  should  make 
an  incorporation  of  that  property,  as  is  very  often  done,  and 
hold  all  the  shares  myself,  I  should  not  be  any  richer  than  I 
was  before.  On  the  contrary,  I  should  be  very  much  poorer; 
because  I  should  be  subject  then  to  another  tax,  a  double  tax 
in  Massachusetts  upon  that  property,  which  has  not  changed 
its  nature  at  all ;  it  has  merely  changed  from  being  real  estate 
to  a  corporation.  Massachusetts  under  those  circumstances 
would  consider  it  had  a  right  to  tax  me  on  a  million  dollars 
worth  of  property,  whereas  previously  it  had  not  felt  itself 
entitled  to  tax  me  on  that  property.  I  should  be  very  willing 
indeed  to  pay  that  tax  if  my  property  had  doubled,  but  inas¬ 
much  as  my  property  has  not  changed  at  all  we  call  the  second 
tax  double  taxation. 

Supposing  I  have  all  the  shares  of  a  Massachusetts  corpor¬ 
ation  worth  $ 100,000  and  that  my  brother,  living  in  New  Hamp¬ 
shire,  has  all  the  shares  of  a  New  Hampshire  corporation  of  the 
value  of  $100,000,  and  that  in  consequence  of  a  whim  or  for  any 
other  reason  that  seemed  to  us  fit,  we  exchanged  shares. 
The  corporation  which  I  own  and  which  exists  in  Massachu¬ 
setts  is  taxed  here  ;  the  corporation  which  my  brother  owns 
and  which  exists  in  New  Hampshire  is  taxed  there.  There 
are  two  taxes  paid.  Suppose  we  swap  our  shares,  I  take  his 
and  he  takes  mine.  According  to  the  laws  of  Massachusetts,! 
am  taxable  upon  the  shares  that  I  hold  in  the  New  Hampshire 
coporation,  the  New  Hampshire  corporation  is  taxable  there 
for  its  property;  and  the  Massachusetts’  corporation,  whose 
shares  my  brother  holds  now,  is  taxable  here.  There  are 
three  taxes  now  paid  where  there  were  only  two  before,  and 
yet  there  is  no  more  property.  Why  are  there  three  taxes  ? 
There  is  no  more  taxation  in  New  Hampshire,  because  they 
don’t  tax  my  brother  upon  his  holdings  of  Massachusetts’ 
shares :  they  don’t  tax  holders  of  foreign  shares  at  all ;  but 
there  are  now  three  taxes  where  there  were  only  two  before. 
Where  is  the  change  ?  It  is  in  Massachusetts.  There  are 
two  taxes  paid  in  Massachusetts,  and  yet  there  has  been  no 
increase  of  property  anywhere.  I  don’t  own  any  more  than  I 
did  before.  Massachusetts  is  taxing  twice  where  it  only  taxed 
once,  and  that  is  what  we  call  double  taxation. 

The  same  thing  exists  with  regard  to  a  herd  of  cattle.  If  I 
have  a  herd  of  cattle  in  Maine  they  are  taxed  there.  I  am 
obliged  by  our  laws  to  declare  the  possession  and  the  value 
of  that  herd  of  cattle  and  pay  another  tax  upon  it  in  Massa¬ 
chusetts.  That  is  what  we  call  double  taxation.  So  that  if 


we  were  required  to  justify  the  correctness  of  the  title  of  our 
league,  I  hope  I  have  done  so. 

Mr.  Hamlin  spoke  about  the  taxation  amounting  to  from 
30  to  50  per  cent,  upon  the  income.  I  would  like  to  read 
what  the  Taxation  Commission  said  with  reference  to  the  taxa¬ 
tion  of  income.  They  say: 

“  Whether  or  not  the  taxation  of  foreign  securities,  as  now 
practiced  by  the  Commonwealth,  is  in  a  large  sense  just,  it  is 
certainly  impracticable.  We  believe  it  is  impracticable  by 
any  method  which  proposes  to  tax  securities  to  the  same 
extent  and  by  the  same  methods  as  tangible  property  situated 
on  the  spot.  We  believe  that  the  proposed  system  of  rigid 
enforcement  by  State  assessment  would  not  accomplish  its 
object,  and  that,  quite  apart  from  the  desirability  of  the  end 
proposed,  the  result  would  be  fruitless  and  disappointing.” 

That  is  what  Mr.  Hamlin  said,  that  it  would  be  fruitless 
and  disappointing. 

“  It  must  be  remembered,  in  the  first  place,  that  at  the 
rates  now  common  with  us  the  taxation  of  securities  is  at  a 
higher  rate  than  has  ever  been  contemplated  in  any  civilized 
country.  With  the  rate  of  interest  at  not  over  four  and  one 
half  per  cent.,  if  indeed  so  high,  on  good  securities,  and  with 
the  tax  rate  averaging  one  and  one  half  per  cent.,  the  tax 
amounts  to  one-third  of  the  income.  No  civilized  country  has 
imposed  with  success  an  income  tax  (in  ordinary  times)  of  more 
than  three  or  at  the  most  five  per  cent.  During  our  civil  war 
the  income  tax  was  for  a  while  at  ten  per  cent  on  large 
incomes,  but  it  was  never  proposed  to  make  it  heavier,  while 
its  effective  collection  at  this  rate  was  difficult  even  during 
the  enthusiasm  for  the  conduct  of  the  war  and  impossible 
under  the  conditions  of  peace.  Can  we  expect,  then,  to  col¬ 
lect  honestly,  equally,  effectively,  a  tax  amounting  to  33^3 
per  cent,  on  income  derived  from  the  most  elusive  form  of 
property?  ” 

In  the  case  of  the  taking  of  from  30  to  50  per  cent,  of  the 
income,  the  instant  that  it  was  known  that  that  was  going  to 
be  done  the  holder  of  that  property  would  say  to  himself, 
‘How  can  I  escape  this?’  It  is  possible  that  he  might  get 
into  a  panic,  he  might  yield  to  importunities  that  might  be 
made  to  him,  and  he  might  say,  ‘  I  will  step  across  the  bounda¬ 
ries  of  my  state.  All  I  have  got  to  do  to  escape  this  tax,  to 
get  into  a  community  where  this  enormity,  this  confiscation  of 
a  third  to  a  half  of  my  income  is  not  practiced,  is  to  step 
across  the  boundaries  of  Massachusetts.’  Not  one  State  that 


23 


adjoins  Massachusetts  undertakes  to  tax  the  shares  of  foreign 
corporations.  That  is  a  very  easy  remedy.  Supposing  he  clid 
it  and  we  corrected  our  laws  afterwards,  how  could  we  get  him 
back  again?  Not  easily.  People  who  leave  a  state  for  one 
reason  are  very  apt  to  stay  away.  They  may  be  afraid  that 
when  they  come  back  again  the  law  will  be  reimposed  and 
they  will  be  struck  again.  In  any  event,  those  who  ask  us  to 
execute  this  law  and  thereby  to  drive  our  property  owners  out 
of  the  state  ought  to  guarantee  that  if  those  men  leave  the 
state  on  the  execution  of  the  law  they  will  get  them  back 
again  provided  the  law  is  corrected.  I  don’t  think  that  we  in 
Massachusetts  should  be  placed  in  the  position  of  losing  tax 
payers  unless,  if  the  law  is  corrected  so  that  Massachusetts 
will  be  available  for  them  again  as  a  residence,  the  people 
who  have  driven  them  out  will  guarantee  to  bring  them  back 
again.  I  think  that  is  somewhat  of  a  consideration.  In  any 
event,  supposing  he  said,  ‘  I  won’t  do  that,  I  will  stay  here,’ 
all  he  has  got  to  do  is  to  sell  his  property  which  is  subject  to 
this  taxation  which  he  will  not  submit  to  and  invest  it  in  real 
estate  elsewhere.  Or  he  may  say,  ‘  If  my  income  has  got  to 
be  cut  down  from  four  per  cent,  to  two  per  cent., hang  it,  I  will 
put  it  into  government  bonds.  That  is  a  very  simple  thing  to 
do.  If  I  have  got  to  be  satisfied  with  two  per  cent.,  I  will  put 
it  into  government  bonds  where  there  is  no  chance  of  loss 
whatever,  and  where  there  will  be  no  taxation.’  Then  Massa¬ 
chusetts,  in  attempting  to  get  something,  will  have  placed 
itself  in  a  position  where  it  is  physically  impossible  for  it  to 
get  anything  from  that  man,  and  therefore  we  claim  that  it 
will  be  inoperative  to  endeavor  to  collect  the  tax. 

In  our  bill  we  make  the  proposition  that  it  is  proper  for  a 
tax  to  be  levied  upon  incomes.  It  is  a  question  whether  a  tax 
is  an  equivalent  for  protection  that  is  given  and  should  be 
only  that,  or  whether  people  should  pay  taxes  in  proportion  to 
their  ability.  There  is  a  very  good  argument  to  be  made  that 
no  tax  is  due  excepting  for  protection  that  is  given.  But  that 
is  not  very  attractive  to  us  in  these  days,  and  I  must  confess 
myself  that  I  am  quite  communist  enough  to  think  that  taxa¬ 
tion  should  be  according  to  ability.  Therefore,  if  a  person 
has  ability  to  pay  the  tax,  he  should  do  so.  But  no  person  has 
ability  to  pay  30  per  cent,  or  50  per  cent,  tax,  unless  you  can 
say  that  if  he  has  any  income  at  all  he  has  the  ability  to  part 
with  the  whole  of  it.  So,  on  the  question  of  ability,  you  might 
as  well  say,  ‘We  will  take  his  whole  income.  He  is  able 
to  pay  it,  because  he  has  got  that  income.’  That  would 


24 


be  evidently  very  unfair,  for  the  whole  of  his  income,  but 
he  would  be  able  to  pay  it  because  he  has  it.  He  might 
not  be  able  to  live  very  well,  but  he  would  be  able  to  part 
with  what  he  had  received.  So  that  on  the  question  of  ability 
I  don’t  think  that  you  can  say  that  simply  because  a  man  is 
able  to  pay  30  per  cent,  he  should  do  it.  I  think  that  the  pro¬ 
portion  of  tax,  of  his  income,  which  he  should  pay,  should  be 
less  than  30  per  cent.  Our  proposition  is  that  it  shall  be  at 
the  same  rate  as  the  tax  upon  income  from  profession,  and  we 
believe  that  if  it  were  put  upon  that  fair  basis  the  returns 
would  be  made.  *  *  *  * 

In  answer  to  the  following  question  by  a  member  of  the 
Committee  “What  you  mean  to  say  is  this:  That  those  who 
are  now  escaping  taxation  will  voluntarily  come  up  and  allow 
their  incomes  to  be  taxed  according  to  the  new  rates ;  that  is, 
the  other  nine  hundred  million  dollars  will  come  in  and  be 
taxed  according  to  those  rates?”  Mr.  Curtis  said: 

I  can  only  take  my  own  instance.  I  know  that  if  I  were 
subject  to  a  taxation  of  30  per  cent,  upon  my  income  I  would 
do  anything  in  the  world  not  to  have  that  disclosed,  and  if  it 
were  necessary  for  me  to  move  to  Newport  I  would  try  to  do 
so;  but  if  I  were  promised  that  my  income  should  be  taxed 
at  the  rate  of  one  and  a  half  per  cent.  I  should  say,  ‘  Very 
well,  I  will  declare  it.’  I  should  pay  the  tax  willingly;  I 
should  disclose  my  income  freely,  and  I  think  that  all  the 
others  would,  too.  I  think  there  would  be  so  many  incomes, 
that  would  be  disclosed  under  those  circumstances,  because 
they  would  feel  that  it  was  not  so  unjust,  that  it  would  make 
up  for  anything  that  is  expected  to  be  in  the  nature  of  a 
loss  by  the  adoption  of  our  measure. 


* 


4 


25 


